Toll Brothers Record Shows The American Housing Boom Has No End In Sight

Dated: 11/08/2018

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Unemployment keeps falling and home prices keep going up. It's a great recipe for a strong housing market.

Nothing has been able to stop the housing boom -- not even higher interest rates. 

Luxury home builder Toll Brothers (TOL) said Tuesday that demand for its houses was strong across the country -- the company signed a record number of contracts last quarter. 

Toll Brothers reported quarterly financial results that easily topped forecasts and raised its outlook for the year, citing a backlog of new homes for the third quarter. 

Higher rates do not seem to be an issue for prospective buyers, mainly because the job market remains strongand housing prices are rising. 

The company said that the average price of its homes in the most recent quarter was $851,900, compared to $791,400 a year ago. And Toll Brothers expects that prices for the current quarter will range between $840,000 and $870,000. 

The only weak spot was California, where demand cooled a bit. 

Toll Brothers executive chairman Robert Toll said the company believes the new home market can continue to grow in the coming years -- especially as people seek to cash in on the rising value of their current home and trade up. 

As the value of people's homes increases, empty nesters and homeowners looking for bigger houses have more equity to work with, Toll said in the company's press release. He also expects those two groups and Millennials will fuel demand for new homes in the coming years. 

Shares of Toll Brothers surged more than 11% on the solid earnings Tuesday -- but the stock is still down 20% for the year. 

The results are the latest sign that the recent homebuilder stock slump may have been an overreaction. Investors feared that rate hikes would weaken demand for homes. That hasn't happened yet. 

Rival builder Lennar (LEN) also reported healthy quarterly results in late June. 

Retail giant Home Depot (HDjust posted strong numbers last week as well, another sign that people continue to spend on their houses. Home Depot rival Lowe's (LOWwill report results Wednesday and analysts are expecting a nearly 30% jump in earnings.

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Chad Arend

Chad grew up in the Phoenix area, and can't imagine living anywhere else. After working in finance for 6 years, he decided to make the move to real estate in late 2004. Real Estate runs in his family,....

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